Some of crypto’s earliest winners are moving their coins into Wall Street products.
On Oct. 21, Grayscale said it was expanding in-kind subscriptions to 10 of its crypto investment products. Qualified investors can contribute tokens directly in exchange for fund shares instead of selling those assets for cash first. The lineup includes the Bitcoin Mini Trust ETF, the Ethereum Staking Mini ETF, and funds tied to Avalanche, Chainlink, Dogecoin, Hyperliquid, Solana, Sui, XRP and Zcash. Minimum subscription sizes range from $80,000 to $360,000.
In Grayscale’s announcement, Steve Vanourny, the firm’s head of index, said, 「As cybersecurity threats increase, including vulnerabilities in self-custody and DeFi, institutional-grade custody is becoming increasingly valuable.」
Li Lin offers a clear example
One of the clearest case studies in this shift is Li Lin, the founder of Huobi.
Li founded Huobi in 2013 and was among the earliest builders of crypto exchanges in China. He sold the company in 2022, then turned his family office, Avenir Group, into an investment group.
According to SEC 13F filings, Avenir Group began holding BlackRock’s iShares Bitcoin Trust, or IBIT, in Q2 2024. It has ranked as Asia’s largest institutional holder of a Bitcoin ETF for eight consecutive quarters. Its position grew from about 11.3 million shares in Q4 2024 to about 18.3 million shares in Q3 2025, valued at roughly $1.19 billion. In Q1 2026, the holding was about 18.28 million shares, worth around $702 million.
That is a notable choice. A founder who built a crypto exchange and understood Bitcoin earlier than most Wall Street portfolio managers chose to keep a billion-dollar-scale BTC exposure inside BlackRock’s ETF rather than in a cold wallet.
What in-kind subscriptions actually change
The mechanism Grayscale expanded is standard in the traditional ETF market, but still relatively new in crypto.
On July 29, 2025, the U.S. Securities and Exchange Commission approved in-kind creation and redemption for crypto ETPs. Before that, all U.S. Bitcoin and Ethereum ETFs had to use cash creations and redemptions. Authorized participants, or APs, would deliver dollars to the fund to create shares, and the fund would then buy crypto in the market. On redemption, the process ran in reverse: the fund sold crypto and returned cash to the AP.
Under an in-kind structure, APs can deliver Bitcoin directly to the fund and receive ETF shares. On redemption, the fund can return Bitcoin directly to the AP.
That may look like a technical change in workflow. The bigger issue is tax treatment.
In a cash model, when a fund sells Bitcoin, the sale can trigger capital gains that are ultimately allocated across holders. In an in-kind model, the fund transfers Bitcoin directly to the AP rather than selling it, so the transaction does not create a taxable sale event. For early holders who bought Bitcoin in 2015 or 2016, unrealized gains may be 10x or even 15x. Selling coins outright to move into an ETF could create a large capital gains bill. Using in-kind subscriptions pushes that tax burden into the future.
The article stresses that this is a deferral, not an exemption. The original cost basis carries over to the ETF shares, and taxes still apply when those shares are eventually sold. But for investors managing billion-dollar positions, the difference between paying now and paying later is substantial.
Grayscale’s move also broadens the use case beyond Bitcoin and Ethereum. By extending the mechanism to 10 products across multiple tokens, the firm is opening the same route to large holders of SOL, XRP, LINK and even DOGE.
Self-custody is no longer the only default
Li Lin is not the only example cited in the piece.
Robbie Mitchnick, BlackRock’s head of digital assets, told Bloomberg that IBIT has processed more than $3 billion in whale Bitcoin conversions. Those early holders moved on-chain BTC into IBIT, received ETF shares, and then managed those positions through brokerage accounts or private banking relationships.
On-chain data cited in the article points in the same direction. Since spot Bitcoin ETFs were approved in January 2024, the growth rate of self-custodied BTC has continued to slow. Analyst Willy Woo said, 「Since spot ETFs launched, the growth rate of self-custody users has been declining.」
The number of active Bitcoin addresses fell from nearly 1 million in January 2024 to about 650,000 by the end of June 2025, the lowest level since 2019.
As of July 2025, IBIT had more than $88 billion in assets under management and held more than 700,000 BTC. It crossed the $80 billion mark in 374 days, compared with 1,814 days for Vanguard’s VOO. By Q4 2024, institutional investors held 25.4% of total spot Bitcoin ETF assets, or about $26.8 billion.
At the same time, the number of publicly listed companies holding BTC reached 125 in Q2 2025, up 58% from the previous quarter.
What these investors are really buying
The article breaks the answer into several layers.
Tax efficiency comes first. In-kind subscriptions offer tax deferral, and that is especially attractive for large, low-cost positions. The piece gives an example of an early investor holding $100 million worth of BTC with a cost basis below $10 million. Selling those coins to move into the traditional financial system could create an immediate tax bill worth tens of millions of dollars. Entering an ETF through an in-kind subscription leaves that money undeployed by tax for the time being.
Custody convenience is the second layer. Self-custody means protecting seed phrases, defending against hacks and planning for inheritance. The article notes that security incidents continued across crypto in 2024, including attacks on DeFi protocols and wallet phishing. Grayscale itself cited rising cybersecurity threats as part of the case for institutional custody. ETF assets are held by custodians such as Coinbase or BitGo, and the article says that structure comes with insurance and legal recourse, which matters to people managing large pools of wealth.
The third layer is access to financial infrastructure. ETF shares can sit inside retirement accounts such as IRAs, be used as collateral for borrowing, be leveraged through brokerage margin accounts, and be folded into family trust portfolios. Direct BTC holdings either cannot do that or require much more complicated arrangements. For ultra-high-net-worth investors trying to manage global assets through private banks, an IBIT ticker is easier to work with than a hexadecimal wallet address.
There is also the compliance burden. Holding large amounts of crypto directly can create increasingly complex tax reporting and anti-money-laundering work. ETFs package much of that into the fund structure, leaving the holder with a standard securities position to report.
Not the end of self-custody, but a change in behavior
Mitchnick’s wording, as quoted in the article, was that these early adopters are 「more willing to manage their exposure within their existing financial adviser or private bank relationships.」
That does not mean self-custody is dead. Bitcoin’s core narrative still rests on its role as digital gold and a censorship-resistant asset. For investors who hold BTC as a hedge against systemic risk, placing coins inside a BlackRock custody structure clearly cuts against that purpose.
But for another group, BTC has shifted from belief to allocation. What they want is an efficient way to hold that exposure inside the financial system they already use. ETFs offer a container that is tax-friendlier, easier to fit into compliance processes, simpler to custody and easier to plug into existing wealth-management frameworks.
Grayscale’s expansion from two products to 10, together with BlackRock’s more than $3 billion in whale conversions, points to the same direction: ownership of crypto exposure is increasingly being expressed through Wall Street account systems rather than on-chain wallets.
The price exposure remains. The old line 「Not your keys, not your coins」 is still there, but the article argues that a different logic is taking hold.
Martin Hiesboeck, chief investment officer at Uphold, put it bluntly: 「This is another nail in the coffin of the original crypto ethos.」
The piece also notes a calmer rebuttal. ETFs did not pull users out of cold wallets by force; they opened markets that had previously been blocked by compliance barriers. People committed to self-custody were never the target customers. Traditional finance capital was.
Both readings can be true at the same time. But when some of the people who know crypto best start choosing ETFs, the story is no longer just that Wall Street came to crypto. Crypto, in part, walked over to Wall Street on its own.